#04 April 2016

In focus – Competition

As tackling transparency in competition policy meets the EUs immediate concerns and launches the approximate road map set out in the EU Ukraine Association Agreement, fast track legislative changes have already brought a new agenda for both business and policy makers. The long expected revision of unrealistically low thresholds for merger control and adopted guidelines on the calculation of fines for violating competition law is definitely one step forward towards predictability, the core pillar of every business plan and investment decision...

With the support of Tax Regulation

In recent years the Organization for Economic Cooperation and Development has been working on measures to combat offshore and aggressive tax optimization. In this sense transfer pricing has always been one of the most effective means of preventing tax base understatement (erosion) and taxable profit shifting to low-tax jurisdictions. In their final version, namely in autumn 2015, the changes were adopted by the Group of Twenty (G20) heads of government as part of the BEPS plan. The plan itself directly involves 15 key measures to combat erosion of the tax base, four points of which are related to transfer pricing (TP). Now the major changes have to be implemented into the national legislations of the countries...

Expert Opinion

Ukrainian Competition Law: Recent Milestones in Development

Iaroslav V. Medvediev, Andriy M. Gumenchuk

The period 2015 early 2016 was a very fruitful one for Ukrainian competition law and its regulatory framework. On 19 May 2015 Yuriy Terentyev, former deputy CEO, chief legal counsel of ArcelorMittal Kryvyi Rih, was appointed Head of the Antimonopoly Committee of Ukraine (AMCU). Throughtout the summer of 2015 the President of Ukraine appointed new state commissioners of the AMCU, thereby refreshing the looks of Ukrainian competition authority by experienced professionals with business background.

Such appointments have already made a contribution to reforming Ukrainian competition law. The Ukrainian Parliament and AMCU addressed the long-expected requests of the European Union, Ukrainian business community and foreign investors and introduced essential legislative changes, which are aimed at the overall improvement of domestic competition law.

In Re

Antitrust Implications of Non-Compete Terms in M&A Transactions

Taras V. Dumych, Mykhailo S. Razuvaiev

On 26 January 2016 the Ukrainian Parliament took a long-awaited and significant step to improve the legal framework on merger control and adopted the Act amending the OnProtection of Economic Competition Act of Ukraine (the CompetitionAct). The Act will come into force on 18 May 2016.

By introducing a two-tier jurisdictional test and a simplified review process, as well as raising the turnover/assets thresholds, the Act will considerably decrease the regulatory burden on undertakings and shorten the merger control review process. Foreign-to-foreign transactions are expected to benefit from the overhaul. The Act can be considered as an important move to improve the overall image of Ukrainian merger clearance practices, which up till now have been considered as one of the most difficult in the world and as a bottleneck for cross-border M&A transactions...

Must-have Elements of Effective Competition Compliance

Anastasia A. Usova, Kateryna S. Chumak

Recent developments in Ukrainian competition regulation and enforcement, such as the introduction of the Guidelines on Fining, that set the rules for calculating fines for antitrust violations and mandatory publication of the decisions of the Antimonopoly Committee of Ukraine, make the companies take competition compliance risks much more seriously than ever before. The need to care for an efficient compliance is especially important in view of more sophisticated approaches on the part of the AMCU and significant increase in the amounts of fines...

Competition Regulation of Pharma Sector

Galyna P. Zagorodniuk, Dmytro A. Tkachenko

In accordance with the Ukraine-EU Association Agreement, Ukraine has agreed to harmonize its competition laws and enforcement practices with the relevant EU regulations. The Verkhovna Rada of Ukraine and the Antimonopoly Committee of Ukraine (the Committee) have already taken significant steps towards implementing the provisions of the Association Agreement by adopting guidelines on the imposition of penalties for violation of antitrust laws and by increasing merger control thresholds. However, building on these achievements, the Committee still has to bring its enforcement practices into line with the concepts and practices of contemporary EU antitrust rules.

In particular, back in 2011 the Committee began an investigation of the medicines market with a focus on pricing and discount strategies at the wholesale level. While the Committee issued recommendations to some market players, the investigation is on-going and uncertainty as to what types of pricing models and discounts are allowable remains unresolved. Therefore, it may prove useful to look into concepts and policies developed by the European competition authorities within the investigation of European markets of medications...

News

Deals

Avellum legal counsel to Hamed Alikhani

Sayenko Kharenko advised Oschadbank

Integrites legal advisor to Nova Poshta Group

AEQUO advised Danone S.A.

Sayenko Kharenko advised Goldman Sachs

Avellum advised the Ukrainian Ministry of Finance

Sayenko Kharenko Ukrainian legal advisor to PJSC Moscow Exchange

Cases

NBU found complicit in bankruptcy of Ukrgasprombank

Oschadbank won UAH 3 billion via court action against Mykola Lagun

Law Digest

Ukraine to join Government Procurement Agreement

The Act on Electronic Income Declaration

Cabinet of Ministers to implement new business costs estimation system

Scheduled and unscheduled audit procedure is set

Draft

Criminal responsibility for circumvention of objective cases distribution

Financial Police to be established in Ukraine

Introduction of criminal infractions

Biznews

Trade Policy

New Disputes with Russia at WTO

M&A

Deutsche Boerse and London Stock Exchange agreed terms for merger

Banking & Finance

Ukraine received USD 331 million loan from Japan

Privatization

List of state-run companies not subject to privatization is shortened

Capital Markets

Apple placed USD 3.5 billion worth of Bonds

Doing Business

German-Ukrainian Chamber of Commerce and Industry

Chamber News

What Business Expects from the Agricultural Sector in 2016 chamber News

According to the Chamber Investment Climate Survey, which was held at the end of 2015, 166 Members of the American Chamber of Commerce in Ukraine identified agriculture as the most prospective area for growth in 2016. However, Chamber Members believe that this sector requires elaboration, as well as development of alternative instruments of financial support for small and medium-size farmers, further deregulation (to simplify the process of obtaining permits) and the introduction of the agricultural land market. Therefore, the Chamber determined the TOP-3 policy priorities in agriculture for this year...

UBA news

UBA International Law Committee

UBA Committee on Enforcement Law

Cover Story

Broader Vision

When Ukraine is criticized for the absence of ground-breaking reforms, competition law is probably one of the most rapidly changing areas with certainty of long anticipated changes. The new rules of the game affect the speed and quality of business decisions, short and long-term strategies, scope of legal work and also help to reshape the subsequent market as such.

We decided to learn about a broader vision on these issues from both private and public perspectives in our conversation with Antonina Yaholnyk, founding partner of competition law boutique CLACIS.

Global Legal Update

Slovakia: a Little-Big Country for Business

Kostiantyn M. Buialo

The coming into force of the UkraineEuropean Union Association Agreements economic section and simultaneous deterioration of domestic market conditions is forcing Ukrainian business to develop and implement strategies for entering the markets of EU member states.

When people speak about doing business in one of the EU countries, they often forget that the European Union provides residents of its member states with four major freedoms: free movement of goods, free movement of persons, free movement of services, and free movement of capital. However, in order to take advantage of these freedoms, both individuals and legal entities have to be residents of one of those EU member states.

Therefore, an entrepreneur who is considering doing business on EU territory faces the issue of selecting a country, residency in which would be an optimal point of entry to the EU market. After all, having gained resident status in any of the European Union countries a person gets the opportunity to offer goods and services freely and to relocate capital across the whole of EU territory.

Hence, let us draw your attention to Slovakia as an optimal point of entry to the European market. It is a country that shares a common border with Ukraine, where it is rather easy to overcome non-tariff barriers, and where residents traditionally have a positive attitude towards Ukraine and its citizens...

Crux

Enlightened Legislative Drafting

Over the last month many legislative initiatives were submitted to parliamentary committees for consideration. Our traditional commentary section looks at some of the latest legislative changes and a large number of proposed draft acts that require thorough analysis. The carefully collected comments may, as usual, shed some light.

The Ukrainian Parliament ratified The Social Security (Minimum Standards) Convention No.102 Draft Act No.0091. How can this document affect work arrangements and labor provisions and the rights protection of salaried workers?

Volga Sheyko, associate, Asters

It is noteworthy that the Ukrainian Parliament ratified The Social Security (Minimum Standards) Convention partially, i.e. it will not affect, for example, the pension system. In my opinion, it might be related to the possible future introduction of the accumulative pension system in Ukraine. The ratification of the Convention by itself does not guarantee either judicial protection in the health service or the expansion of categories of citizens that are subject to the provisions of this Convention.

The last act on visa-free EU travel, namely on electronic declaration of officials assets and income, was passed in the Ukrainian Parliament on 15 March. How can it influence the fight against corruption? What has been left unnoticed and needs additional revision?

Sergiy Gryshko, partner, head of dispute resolution, Redcliffe Partners

The fact, that following hot debate and much resistance from certain MPs, the Ukrainian Parliament passed the Act of Ukraine No. 1022-VII (the Electronic Declarations Act) is of immense importance. Contrary to popular belief, the Electronic Declarations Act does not introduce the electronic declaration of state officials incomes, but repeals the delay in implementing it and introduces some important new rules.

The Cabinet of Ministers of Ukraine approved the Draft Act On the Establishment of a Business Ombudsman. What rights should be established for a Business Ombudsman? How can the introduction of this institute affect the investment attractiveness of Ukraine?

Sergii Androshchuk, senior associate, AstapovLawyers International Law Group

The Business Ombudsman is a bridge between business and government that promotes the protection of enterprise entities during the implementation of constitutional law on entrepreneurial activity, as well as protection from corruption and other forms of unfair behavior in the field of management.

Draft Act On Financial Police, No.4228 provides the establishment of Financial Police and liquidation of the Tax Police. What means on exposure, suppression and investigation of crimes in the formation and use of state financial resources, and in the field of economic security, can the new authority receive?

Vyacheslav Krahlevych, partner, FCLEX Law Firm

The Draft Act provides for the creation of a new law-enforcement agency called the Financial Police. It is a body whose function will be to investigate and solve crimes in the domain of formation and use of state financial resources and economic security.

The document defines the legal status and the powers of the body, etc.

In fact, the draft provides for the liquidation of the tax police, and for the creation of the Financial Police. That is, for the Implementation of the all-national concept of reformation of the State Fiscal Service of Ukraine, as of public service bodies without the law-enforcement function.

Draft Act No. 4203 envisages introduction of a criminal liability for circumvention from the distribution of impartial cases by the automation system of document control in courts. Does it solve the problem and allow the corruption element to be eliminated? Which additional mechanisms could be used to bring the automation system of document control into line with international standards?

Andrii Hvozdetskyi, associate, Spenser & Kauffmann

This draft proposes to criminalize bringing a lawsuit with several identical claims containing formal defects, in order to select loyal judges for the proceedings.

In my opinion, the respective amendments do not solve the problem. This does not apply to the issue of corruption, but it is the very disposition of the Criminal Code.

Draft Act No. 4057 On Amending the Criminal Procedure Code of Ukraine (in case of special aspects of recovery recourses to the state before adjudgment) puts the special confiscation procedure in place. Will the present initiative fight corruption effectively? What problems can arise in the course of practical application?

Vitaliy Serdyuk, Partner, AVER LEX Attorneys at law

Victoria Kirina, Attorney of Criminal Law Department, AVER LEX Attorneys at law

Draft Act No. 4057 in the version adopted by the Verkhovna Rada in the first reading (as well as numerous attempts to expand the basis for implementation of the procedure of special pre-trial investigation) should be considered not as an instrument to fight corruption, but as the negative tendency to legalize usage of the criminal process as mechanisms for eliminating political and business opponents.

Thus, while developing and adopting draft act No.4057 the principle of presumption of innocence and the principle of inviolability of private property were grossly ignored.

The main purpose of Draft Act No. 2897 On Amendments to Certain Legislative Acts of Ukraine on Introduction of Criminal Offenses is fulfillment of state policy on humanization of criminal liability. How can it affect the legal practice and work of criminal defense attorneys?

Sergey Protasov, senior associate, attorney at law, Trusted Advisors

Draft Act No. 2897 is a logical extension and an integral part of the reform of the law-enforcement authorities. It amends the Criminal Code, Criminal Procedure Code, the Customs Code of Ukraine and the Code of Ukraine on Administrative Offences.

How can Draft Act No.4216 On Amending Certain Legislative Acts regarding Reaction for Unlawful Takeover and Despoilment of Commercial Entities affect corporate relations and the investment climate in Ukraine?

Pavlo Shovak, associate, Avellum

The Draft aims to restore the VAT position of agricultural producers, which they had prior to the last tax reform, and to provide equal VAT refund treatment for taxpayers.

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